The Worst Gold Bear is now the Most Convinced Bull

The Worst Gold Bear is now the Most Convinced Bull

Less than one year ago, Dutch bank ABN AMRO has put itself on the map by being more bearish on gold than Goldman Sachs. Whereas the latter was expecting to see a gold price of $1000/oz, the head analyst responsible for precious metals at ABN AMRO said she was expecting a gold price of $800 per ounce by the end of this year.

Source: ABN Amro

Fast forward to today. Gold is trading firmly above the $1300/oz, and almost 70% higher than ABN’s target price. But of course, just like any other ‘analyst’, the bank quickly reversed its course just a few months later when the market started to turn around. The bank, just like so many other banks, suddenly realized gold was there to stay, and started to run behind the curve as their target prices of $1200/oz were immediately met.

ABN Amro has now released an update report with its commodity price projections for the next 18 months, and it’s surprising (but refreshing) to see the bank is now expecting the gold price to end 2017 at $1450/oz. Sure, that’s less than 10% higher than where we are at today, but let’s not forget that’s a 75% increase in target price.

Source: ABN Amro

If possible ABN is now even more bullish on silver, as it’s now predicting a silver price of $24 per ounce by the end of next year. That’s an interesting opinion and even though we do believe in (much) stronger gold and silver prices in the next few quarters and years, it’s not easy to even remotely rely on the expectations from a bank that has proven to be a great contra-indicator.

Several market spectators have argued the net long position in the gold futures remains at an elevated level and could result in a correction of the gold price, but that still remains to be seen. The biggest argument for falling gold prices would be the reduced need to have access to a safe haven investment as the equity markets remain buoyant, but as the situation in Turkey showed us, things can change fast. Very fast.

Source: Bank of Nova Scotia

And that’s one of the main reasons why people continue to buy gold. Yes, the buying pace has slowed down in China, but that doesn’t really say much as Asian buyers usually hit the buy-button when the prices are low, as opposed to the Western buyers who tend to jump on the gold-train on its way up. Since the start of this year, the GLD ETF has added in excess of 300 tonnes of gold to its vaults, increasing its AUM by 50%.

The world is waking up, and investors are realizing there’s no better safe haven than owning hard assets, like precious metals. The downward spiral of the gold price has been broken, and the only way seems to be up as both gold and silver are the ‘go to’ metals to protect one’s wealth.